R&D in the Presence of Network Externalities: Timing and Compatibility
Two rival firms decide on the time of R&D and whether the new products should be compatible. I show that network externalities may induce the firms to introduce new incompatible technologies early, which is socially harmful as the R&D costs increase, and de facto standardization becomes less likely. Compared with the equilibrium outcome, both firms may gain by delaying the introduction of incompatible technologies. By agreeing on common standards before product introduction, entry is delayed and profit may increase. An ex post optimal standardization policy may increase the incentives for early product introduction and consequently be an undesirable policy ex ante.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 29 (1998)
Issue (Month): 3 (Autumn)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|